Global Markets Remain Volatile With Fluctuating Oil Prices

Global markets continue to remain volatile with the news of weaker-than- expected U.S. jobs data and heavy fluctuations in oil prices.

The oil market pact between Saudi Arabia and Russia to stabilize the market had resulted in oil prices going up by almost 5 percent.

The gains however were soon lost after no immediate steps were announced by the countries. The market expectations are that the two main producers would work together to rein in oversupply to control prices. Brent crude futures for November closed at $48.5 per barrel.

The payrolls numbers from the U.S. last week renewed hopes that the U.S. Fed Reserve would hold off from increasing the interest rate. The latest jobs report showed 151,000 non-farm jobs in August versus expectations of 180,000.

The Financial Express

This was a sharp drop over July numbers which was at 275,000. The weak numbers resulted in investors reducing the chances of a rate hike in September to 20 percent from 30 percent, resulting in boosting markets across the world. The expectation of a rate hike towards the year end remains at 60 percent.

In a statement, Paul Fage, strategist in investment firm TD Securities said

We don't expect the Fed to do anything until next year so that lays the ground for further advances.

European shares went up to a four-month high while the emerging markets stocks went up by 1.3 percent. Japan’s Nikkei went up by 0.7 percent to its highest since May this year. Bond markets were also buoyed as a result of declining chances of an interest rate hike. Other influencing factors on market volatility were the lack of announcements by Bank of Japan on further monetary easing and the strong performance of UK’s services industry.

While Bank of Japan Governor Haruhiko Kuroda indicated that the ongoing stimulus program would continue, no specific measures were announced. The dollar subsequently dropped to 103.35 yen after gaining 6 percent over the previous week. The dollar also declined against the pound after UK’s Markit/CIPS Purchasing Managers’ Index reported an increase going up to 52.9 in August, the biggest one-month gain in the survey’s history.

The PMI in July taken in the aftermath of the country’s shock vote to exit Europe was 47.4. Investment firm IHS Markit economist Chris Williamson said that it was still unclear if this is a temporary jump or the beginning of a sustained recovery for UK’s economy.

Charlie Harrison

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